Shell Records Revenue Loss, Set To Sell More Offshore Fields In Nigeria

Yemisi Izuora
SHELL PETROLEUM

Royal Dutch Shell said its earnings for the first quarter of this year fell by 56 percent compared with the previous year, as improved performance in marketing and refining failed to offset the effects of the plunge in oil prices.

The company’s profit, adjusted for inventory changes and one-time items, was $3.2 billion, compared with $7.3 billion in the same period a year earlier.

Analysts however, said that there was cause for concern in Shell’s results.

In an indication of how quickly a drop in oil prices can erode margins, the company said that its earnings from finding and producing oil and gas were $675 million for the quarter, compared with $5.7 billion a year earlier.

Shell said that the price it received for oil in the first quarter was 52 percent lower than the same period in 2014, while the price of natural gas fell by 27 percent. The fall in prices directly cut $4.7 billion from earnings.

Biraj Borkhataria, an analyst at RBC Capital Markets in London, in his commenting on the unfolding scenario pointed out that profits in what Shell calls “integrated gas,” which mostly refers to liquefied natural gas, fell sharply to about $1.2 billion, compared with about $3.3 billion a year earlier.

He said, that Liquefied natural gas has been an important earner for Shell and a big part of the calculus in its recent $70 billion bid for BG Group, which was once part of British Gas and is a major player in liquefied natural gas.

Refining and marketing, as well as chemical sales, on the other hand, showed strong improvement, together earning $2.6 billion, compared with about $1.6 billion in the same period a year earlier.

In recent months, refining, which has been a struggling business at most major oil companies because of oversupply, has improved because of lower prices for the crude oil used in the process and relatively strong demand.

Ben van Beurden, Shell’s chief executive, said in a statement that “in what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance.”

Mr. van Beurden said that Shell had sold about $2 billion worth of assets this year that the company considered nonstrategic.

These sales included onshore oil properties in Nigeria that are vulnerable to sabotage and oil theft. Shell also sold 185 gas stations in the United States.

Mr. van Beurden, who became chief executive at the beginning of last year, is trying to offload marginal assets like the Nigerian onshore fields and some refining and marketing networks.

He is focusing on Shell’s more profitable businesses like liquefied natural gas as well as exploration and production in deep water in the Gulf of Mexico and elsewhere.

Its most important move was its offer in April to buy BG, which would be Shell’s biggest deal ever, by far.

BG would help Shell bolster its exploration and production unit by adding BG’s portfolio of discoveries and properties under development in Brazil, East Africa.

Shell, in turn, would apply its much larger capital resources and development expertise to the combined company.

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